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Z-TESTS We will use the formula for Z from lecture notes, page 2. since H 0 is u

ID: 3153626 • Letter: Z

Question

Z-TESTS

We will use the formula for Z from lecture notes, page 2.

since H0 is usually m1=m2, then m1-m2= 0 and:

for 1, 2 known

for 1, 2 unknown

Z =                if n1 + n2 32

Steps to be covered:

State the hypotheses, and identify the claim

Find the critical value(s) – you might want to draw the curve

Compute the test (statistic) value

Make the decision to reject or not reject the null hypothesis.

PROBLEM 7:

Are the contributions statistically significant equal? Test at .01 significance level

Men: Average gross income = $48,500; standard deviation = $1,000;   

n = 18 employees

Women: Average gross income = $43,600;   standard deviation = $2,000;   

n = 11 employees

Explanation / Answer

7.

Formulating the null and alternative hypotheses,              
              
Ho:   u1 - u2   =   0  
Ha:   u1 - u2   =/   0 [CLAIM]

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At level of significance =    0.01          

As we can see, this is a    two   tailed test.  
Now, the critical value for t is          
df = n1 + n2 - 2 =    27              
              
tcrit =    +/-   2.770682957   [ANSWER, CRITICAL VALUES]  

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Calculating the means of each group,              
              
X1 =    48500          
X2 =    43600          
              
Calculating the standard deviations of each group,              
              
s1 =    1000          
s2 =    2000          
              
Thus, the standard error of their difference is, by using sD = sqrt(s1^2/n1 + s2^2/n2):              
              
n1 = sample size of group 1 =    18          
n2 = sample size of group 2 =    11          

Also, sD =    647.4503218          
              
Thus, the t statistic will be              
              
t = [X1 - X2 - uD]/sD =    7.568148219   [ANSWER, TEST STATISTIC]

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As |t| > 2.771, WE REJECT THE NULL HYPOTHESIS.      

Hence, there is significant evidence that the contributions are not equal. [CONCLUSION]